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At the beginning of the stock market rebound in 1974, investor sentiment was at an all-time low, with 65 percent of the advisors fearing the worst was yet to come. Before the market turned downward in 1977, once again the newsletter writers were optimistic, with only 10 percent bears. At the start of the 1982 sendoff into a great bull market, 55 percent of the advisors were bears, and just prior to the big gulp of October 19, 1987, 80 percent of the advisors were bulls again.
Things inside humans make them terrible stock market timers. The unwary investor continually passes in and out of three emotional states: concern, complacency, and capitulation.
is precisely the time he ought to be concerned enough to check the fundamentals, but he isn’t. Then finally, when his stocks fall on
Recently I read that the price of an average stock fluctuates 50 percent in an average year.
The true contrarian is not the investor who takes the opposite side of a popular hot issue (i.e., shorting a stock that everyone else is buying). The true contrarian waits for things to cool down and buys stocks that nobody cares about, and especially those that make Wall Street yawn.
important skill here is not listening, it’s snoring. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.
gold bugs,
things are never clear until it’s too late.
Then at the moment of greatest pessimism, when eight out of ten investors would have sworn we were heading into the 1930s, the stock market rebounded with a vengeance, and suddenly all was right with the world.
punch bowls,
dentist about plaque than to the manager of an equity mutual fund about stocks, it’s likely that the market is about to turn up.
The market’s up 15 percent from stage one, but few are paying attention.
stage four, once again they’re crowded around me—but this time it’s to tell me what stocks I should buy. Even the dentist has three or four tips, and in the next few days I look up his recommendations in the newspaper and they’ve all gone up. When the neighbors tell me what to buy and then I wish I had taken their advice, it’s a sure sign that the market has reached a top and is due for a tumble.
The market ought to be irrelevant. If
The voluntary returning of money that others would gladly pay you to continue to manage is, in my experience, unique in the history of finance.
I’d love to be able to predict markets and anticipate recessions, but since that’s impossible, I’m as satisfied to search out profitable companies as Buffett is.
The only down year in the stock market in the eighties was 1981, and yet it was the perfect time to buy Dreyfus, which began its fantastic march from $2 to $40, the twentybagger that yours truly managed to miss.
In case after case the proper picking of markets would have resulted in your losing half your assets because you’d picked the wrong stocks. If you rely on the market to drag your stock along, then you might as well take the bus to Atlantic City and bet on red or black.
That’s not to say there isn’t such a thing as an overvalued market, but there’s no point worrying about it. The way you’ll know when the market is overvalued is when you can’t find a single company that’s reasonably priced or that meets your other criteria for investment. The reason Buffett returned his partners’
The only buy signal I need is to find a company I like. In that case, it’s never too soon nor too late to buy shares.
Look for opportunities that haven’t yet been discovered and certified by Wall Street—companies that are “off the radar scope.”
suckered
scrub pine and palmetto brush,
the assets (in the form of the cable subscribers) more than made up for these negatives. All the people with an edge in the cable business could have known it; and so could I. Regrettably, I never took more
The millions of subscribers to Telecommunications, Inc., made it a huge asset.
how Carolyn takes to the old Bette Davis movies and I take to CNN news and cable sports, I would have understood that cable is as much of a fixture as water or electricity—the video utility.
It’s impossible to say enough about the value of personal experience in analyzing companies and
Shield, makes plastic forks and straws, the perfect business
If I could avoid a single stock, it would be the hottest stock in the hottest industry, the one that gets the most favorable publicity, the one that every investor hears about in the car pool or on the commuter train—and succumbing to the social pressure, often buys.
but since there’s nothing but hope and thin air to support them, they fall just as quickly.
and competitors had begun to appear.
Mobile homes, digital watches, and health maintenance organizations were all hot industries where fervent expectations put a fog on the arithmetic.
tract houses
At the same time, the five or six major producers were joined by two hundred new competitors, and they all fought for customers by dropping their prices, and nobody made another dime in the carpet business.
High growth and hot industries attract a very smart crowd that wants to get into the business.
If you have a can’t-fail idea but no way of protecting it with a patent or a niche, as soon as you succeed, you’ll be warding off the imitators. In business, imitation is the sincerest form of battery.
The experts said that this exciting industry would grow at 52 percent a year—and they were right, it did. But with thirty or thirty-five rival companies scrambling on the action, there were no profits. Remember oil services? All you had to say
But then the Japanese got into it, IBM got into it, and Eastman Kodak got into it.
Moby Dick,
In fact, when people tout a stock as the next of something, it often marks the end of prosperity not only for the imitator but also for the original to which it is being compared. When other computer companies were called the “next IBM,” you could have guessed that IBM would go through some terrible times, and it has. Today most computer companies are trying not to become the next IBM, which may mean better times ahead for that beleaguered firm.
The dedicated diworseifier seeks out merchandise that is (1) overpriced, and (2) completely beyond his or her realm of understanding. This ensures that losses will be maximized.
From an investor’s point of view, the only two good things about diworseification are owning shares in the company that’s being acquired, or in finding turnaround opportunities among the victims of diworseification that have decided to restructure.
It’s a very good strategy in situations where the basic business is terrible.
In most cases a company has no idea why the stock is going down.
“What are the Wall Street estimates of your company’s earnings for the upcoming year?”
What you really want from investor relations is the company’s reaction to whatever script you’ve been trying to develop. Does it make sense? Is it working? If you wonder if the drug Tagamet will have a significant effect on SmithKline’s fortunes,
Is there really a two-month backlog on orders for Goodyear tires, and have tire prices really gone up as you’ve concluded from local evidence? How many new Taco Bells are being built this year? How much market share has Budweiser added? Are the Bethlehem Steel plants running at full capacity? What’s the company’s estimate of the market value of its cable TV properties? If your story line is well-defined, you’ll know what points to check.
lead off
What are the plans for further debt reduction?”
“What are the positives this year?” and “What are the negatives?”
